The auction hammer
Serena Sutcliffe, head of Sotheby’s international wine department, says the fraud problems at auctions are most prevalent in Asia and the United States. “So much of the wine that is fraudulent is turning up at auction in the States,” she says “And now, the Europeans are getting involved because they’ve seen how much money can be got out of faking bottles.”

“When we are selling wine, we do not always know where the bottles have come from,” says Sotheby’s Senior Director Stephen Mould. “Maybe the owner has died, the widow doesn’t have all the original invoices. In these cases, one goes on gut instinct,” But, he stresses, if you are buying to sell, provenance is critical. “It’s pure naiveté for people who do buy wine and don’t check.”

Austrian Werner Feldner, who reports on the Wine and Auction Watchlist of wein-plus.de and runs winecollect. eu, says several auction scams seem to float around from one eBay website to another of a different language. One scam sold “1995 Mouton Rothschild–original box.” After high and successful bids, it turned out the sale was just the box, no wine.

Feldner says that a common trick is for a bidder to be immediately contacted by the seller, outside normal eBay channels, with the same wine in larger quantities. The seller takes the credit card and the buyer never gets the wine and may find other charges on the card shortly thereafter. (If you see something fraudulent, contact eBay security; they do take action but often are not as fast as the fraudsters. A spokeswoman for eBay’s corporate office said they did not have any figures but that the problem did not seem to be great.) Feldner says he has seen an increase in counterfeit single bottles in recent months. He monitors, investigates and reports potential eBay wine fraud daily.

Feldner advises potential bidders to watch out for accounts that are open for no more than three days. Another ploy by fraudsters is to sell small items on the account, get good feedback and then put something up like a 1990 Pétrus in a magnum. “Think about it. It would be like buying Pétrus in a drug store!” he says. Ebay itself advises participants not to transfer money if the eBay account owner and bank account owner are not identical.

A grand jury investigation involving auction wine sales has been ongoing for nearly two years, according to people have been subpoenaed and news reports. A Department of Justice spokeswoman would not confirm or deny the investigation.

Charity
So a person finds himself with a fraudulent case or bottles. Other than suing, how else can a newly minted unscrupulous character dump a fraudulent wine and still get a return?

A French couple who received bad wine with a fake label from an online purchase started their own online fraudulent wine sales. They were charged and convicted earlier this year but asked the judge to be lenient—they said they had used good wine in the fake Côtes du Rhone.

A small but worrisome outlet among those who have been stung, however, is the charity auctions. “Last year I was auctioning for a charity and was presented with photos of wines,” says Sotheby’s Mould. “I rejected the [wines for auction].Whether it was being done knowingly or not...” he muses. “A collector may know it’s a fake or think it’s a fake but may have an auctioneer who is not a wine expert and would never know.”

Mike Haney agrees. He runs l’Été du Vin, Nashville’s July charity auction, the premier international lot charity auction in the United States. He says that new auctions run by people with little experience can result in both charity and buyer getting burned. “I worry that 2009 will be the year it really hits. We haven’t had problems so far,” Haney continues, “but we get most of our wines directly from the wineries. Experts check others. And collectors we deal with would be horrified if they gave me a bad bottle.”

Even with a charity, it is buyer beware.

Solutions and resolutionsWhat are your options if you come face-to-face with a fake in the cellar? Bill Koch, who bought four Thomas Jefferson bottles he now believes are bogus (the subject of Benjamin Wallace’s The Billionaire’s Vinegar), could afford to spend a lot more money. He hired experts, took bottles around the world for tests, chased the suspected fraudster and sued. Massachusetts collector Russell Frye, who disovered some of his rare bottles were fraudulent, also sued and settled, but took another route, too: he created wineauthentication. com, a subscription service through which buyers can check their wines. Frye has invited wineries to participate but so far none have.

Trying to crack the counterfeit wine circuit is like playing “Whac-A-Mole,” says Joseph Potenza, an intellectual property lawyer with Banner & Witcoff in Washington D.C. “It pops up here and pops up there. Technology would be a way to turn off the game.”

Technology is racing to keep up. Carpenter and Haney think it is not the buyer’s responsibility, but the industry’s. Until then, Haney believes it will just get worse.

Since 2000, the Bordelais have put on a full-court press against fraud. Most wineries now use engraved bottles and apply techniques on labels such as holograms and watermarks. The capsules are impregnable without total removal so no new cheap wine is siphoned into the bottle. First-growth cartons are now bound by metal strips and sealed.

However, Sylvie Cazes-Régimbeau, president of the Bordeaux Union des Grands Crus, admitted there is no way of guaranteeing old wine is what it is supposed to be since it has passed through so many hands after leaving the chateau.

While some wineries in Napa Valley use anti-counterfeit technology, fraud is not a big issue there, says Terry Hall of the Napa Valley Vintners Association.

Historically, fakes and forgeries have been part of the insurance black hole known as “moral hazard.” But a tiny breakthrough may be on the horizon. Fireman’s Fund has just created a “provenance” policy for for fine art, a first in the insurance world.

“If you become aware you might have a fake or forgery we provide funds to explore the authenticity and to do
provenance research, contact experts and do scientific testing,” said Theresa Lawless, director of fine arts and collectibles for Fireman’s Fund Insurance Co. Lawless said it may be extended to wine. It still
doesn’t cover how you get the money back but does help create a case.

Experts and collectors recommend policies protecting against fire, theft, power outage as well as normal hazards of wine, like dropping the bottle. Warning: Lawless said adjustors would not look kindly on using breakage as a way to get rid of a counterfeit bottle.

Is there insurance for making a stupid purchase? “No,” says Lawless.

And are there repercussions to the winery for repeated attempts at fraud? Of course, but….when Italy’s Sassicaia and Tenuta San Guido were counterfeited in a notorious incident, a Saint-Emilion winemaker who hadn’t yet had the experience wryly noted, “My wine must not be famous enough yet. I’d better raise my price.”